WP wrote that the future of thousands of financial advisers is under threat, according to the Financial Services Council, which has described the advisers chances of survival as “very marginal”. But there are opportunities out there as well, explains Gunilla Miranda.
In 2010, the government announced that it would start a process to create new laws designed to encourage Australians to seek financial advice and boost consumer confidence and trust in obtaining financial advice.
Two years on, the new rules became law on 1 July 2012. The industry has a year to make the transition to comply with these laws which will become compulsory on 1 July 2013.
Under the new laws, financial planners will for instance no longer be allowed to accept commissions for providing advice. From 2012 they must give their clients an option to pay fees. It can't automatically be added to the bill.
“Financial planners have everything to win by creating alliances with accountants and even lawyers so that they can get referrals,” says Terry Slattery, partner of DFK Australia New Zealand.
New regulations are often seen as inhibiting productivity and innovation. However, that is not the whole truth.
“These changes will certainly clear out the financial planners who hasn’t the capacity to restructure. It will simply shine the light on planners who cannot adjust fast enough. They will suffer and exit the industry, but there will still be strong financial planners out there who will grow and see big opportunities,” says Terry Slattery.
One of the big opportunities is of course SMSFs. There are 480,000 SMSFs with $417bn in assets in Australia. The reason people are starting their own super saving is that they want to be in control of their investments. However, running an SMSF comes with a lot of administration work, etc. When the work load increases, there will be many SMSFs who will seek advice from financial planners.
“Financial planners need to improve their knowledge base so they are ready to service the SMSF industry. There was a reason to why people left financial planners and that hasn’t changed. Now when clients are coming back, they will be looking for more advanced advices than they received back then,” said Slattery.
All industries experience structural changes, but changes don’t have to be bad.
“I can’t help looking back to the 80s when we got new tax and super reforms, and then everybody said that would be the end of the accounting profession. Instead the accounting profession has grown. I see parallels here to the financial planning industry,” said Slattery.
The fact is that there is a lot of money looking for guidance. By 2030 it is expected that the SMSFs together will turnover $2 trillion. So if you’re a financial planner – prepare for a great future.
Top 5 tips:
Improve your knowledge base and skills.
Look at your clients holistically. Everything is not about investments; take in your client’s whole life situation.
Be prepared to move fast and be flexible in what you’re offering.
Become the deep expert within a narrower field, realise that you can’t do everything. You can’t advice on shares and give advanced advises about SMSFs at the same time.
Form alliances with accountants and lawyers.